Tribunal allows interest income deduction from cooperative bank investments.

The Tribunal dismissed the first issue regarding the addition of profit but partially allowed the appeal on the second issue, permitting the deduction of interest income earned from investments with the Jharkhand State Co-operative Bank.

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Issues:
1. Addition of Rs.3,75,972 as profit by Assessing Officer.
2. Disallowance of deduction of interest income amounting to Rs.50,99,394.

Analysis:
1. The first issue pertains to the addition of Rs.3,75,972 as profit by the Assessing Officer. The assessee, a cooperative society, received a contract from M/s. Tata Motors Ltd. for maintaining horticulture, showing a profit of 2.94% in the accounts. The Assessing Officer deemed this profit insufficient, estimating it should be at least 8% of the total receipt. The Assessing Officer rejected the claim as the assessee failed to provide evidence for the low profit. The First Appellate Authority upheld this addition. The Tribunal found that the assessee failed to submit complete details about the work contract, leading to the rejection of the claim. Since no evidence was submitted by the assessee, the Tribunal dismissed this ground of appeal.

2. The second issue involves the disallowance of a deduction of interest income amounting to Rs.50,99,394. The dispute revolved around whether interest income earned by the assessee from investments with Jharkhand State Co-operative Bank is eligible for deduction under section 80P(2)(d) of the Income Tax Act. The First Appellate Authority disallowed the deduction, except for interest income earned on statutory deposits. The Tribunal analyzed section 80P(2)(d) and concluded that income derived from investments with a cooperative society qualifies for deduction. As the Jharkhand State Cooperative Bank is a society first and then a bank, interest income earned from this bank on surplus fund investments is eligible for deduction under section 80P(2)(d). Consequently, the Tribunal allowed this ground of appeal, partially favoring the assessee.

In conclusion, the Tribunal dismissed the first issue regarding the addition of profit but partially allowed the appeal on the second issue, permitting the deduction of interest income earned from investments with the Jharkhand State Co-operative Bank.

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